Albany Insights
The Rise of the fCTO
A growing trend in recent months has been increasing interest in becoming and/or engaging a fractional CTO. But what is a fractional CTO and why should a company engage one?
Fractional CTO (fCTO) definition:
An fCTO is a Chief Technology Officer (CTO) who works part-time for a company. It’s a model most suited to startups or smaller businesses, a) because they’re unlikely to need a full time CTO and b) they’re unlikely to be able to afford a full time, employed CTO. It’s also sometimes called a “Virtual CTO” or “CTO-as-a-service.”
Benefits of engaging an fCTO:
By engaging an fCTO, companies get access to the expertise of a seasoned tech leader without the full-time commitment or cost. This can be hugely beneficial for businesses that are looking to grow their tech capabilities or that need help with a specific project or task. Here are some of the benefits:
- Strategic Expertise: fCTOs have a wealth of wisdom and experience in the tech industry and can provide guidance and support to companies across a variety of issues. Especially in a startup context, many fCTOs will have experience of the journey from early stage to Series A,B,C+ so they can provide critical advice on the challenges associated with scaling and growth. An fCTO will often be paired with the engineers who are building the product to think about more strategic and long-term considerations and ask the questions that engineers might overlook.
- Cost-effective: Engaging an fCTO is simply cheaper than hiring a full-time CTO. You get 100% of someone’s experience and wisdom but pay for maybe 20% or 40% of their time.
- Flexible: fCTOs are typically engaged on a part-time, contract basis. The engagement should focus on the value delivered – as soon as the value stops, the engagement concludes. It’s a much more flexible arrangement than hiring a full-time employee.
- Scalable: An fCTO engagement can often be scaled up and down, according to need. This kind of flexibility can really benefit businesses, especially during critical moments, tasks or projects.
- External: An fCTO is part of your team, but not to the same extent as your full-time employed staff. This externality can often be a benefit as they can stay out of political situations and provide a more neutral viewpoint. Many fCTOs engage with a handful of clients simultaneously, which can benefit the company by providing a “this is how my other client solved this problem” viewpoint.
- Legacy: Many fCTOs will upskill the teams they work with, leaving a positive legacy with the team long after they have departed. Sometimes, fCTOs can be used specifically to coach key individuals (especially technical co-founders) who may need to scale themselves alongside their growing businesses, typically moving from a hands-on engineering role to something more involved with team management, tech strategy and innovation.
- Stage Appropriate: CTOs tend to have their areas of specialisation. It’s possible to engage a skilled “early stage” fCTO to work towards Minimum Viable Product and Product/Market fit, then as you get traction it might be wise to engage a different “people and process” fCTO who is more experienced around growing teams, laying down the processes and structures for optimal collaboration and efficiency. There may also come a time when a company needs to move from having an fCTO to a full time, employed CTO. When this moment arrives, often the fCTO will assist the company to hire the right CTO for the long term.
Typical concerns around engaging an fCTO:
Some founders don’t like the idea of engaging fCTOs, preferring to hire someone full time as CTO, or continue or with a hands-on senior engineer or technical co-founder as the most senior tech resource. Here are some reasons why an fCTO might not suit you:
- Control: Some founders are not comfortable sharing control of their company with someone who is not an employee. Founders often have a strong vision and views around how people are incentivised and may not want to give up any control to someone who is not employed.
- Cost: For some, fCTOs seem expensive. CTOs typically charge by the day, so it can feel expensive to hire them (but is likely a lot cheaper than the full time equivalent).
- Commitment: Because they work part-time, many fCTOs will have 2,3 or 4 clients simultaneously. Some founders are unsure whether an fCTO can provide the same level of commitment as a full-time employee, there will be moments where they might be hard to contact, for example.
How to engage an fCTO:
For a seed stage or Series A founder/CEO, here are some of the considerations to think about when looking to engage an fCTO:
- What are your needs? What do you need the fCTO to do? Tech strategy? Implementation? Help the team to measure performance? Be as specific as possible in terms of what the fCTO should deliver, then start looking for an fCTO with the right experience to meet your needs.
- What is your budget? fCTOs typically charge by the day, so it’s important to factor in the cost of their services when making your budget. When we (Albany) introduce an fCTO, we apply a 20% margin to the fCTO’s day rate.
- Timelines? Do you need a fractional CTO right away, or can you wait a few months?
- What is your company culture? It’s better to find a fCTO who is a good fit for your company culture and where the overall chemistry feels right.
- How will you measure success? It’s important to set clear expectations for your fCTO in terms of responsibilities and deliverables and to have a way to measure against them. This will help you to ensure that you’re getting the most out of your investment.
Should you engage an fCTO?
Ultimately, there are both pros and cons to consider, so the decision whether or not to engage an fCTO is a personal one and dependent on the stage and needs of your company at the time.
Here at Albany, we talk to companies every day about the shape, structure and effectiveness of their tech teams. We will always make time to consult with founder/CEOs about your challenges ahead and whether an fCTO, or another option, would be the best way to take your company forward.
If this sounds useful please get in touch to set up a consultation.
